Nov. 21, 2000 -
The financial condition of the state's health maintenance organizations was a mixed bag in the third quarter, with some of the biggest posting healthy profits and others remaining sickly.

Struggling PacifiCare of Colorado posted the largest loss - $10.2 million in the third quarter. The company's financial woes have been well-documented, and it has taken steps to shore up its results.

It recently announced it will pull out of the commercial HMO market in Pueblo and 14 other Colorado counties, primarily in rural areas of the state. Through the end of the third quarter on Sept. 30, PacifiCare had lost $17.4 million.

"The loss is driven by higher-than-anticipated health care costs," said Laura Wegscheid, a spokeswoman for PacifiCare.

The use of both inpatient and outpatient services has gone up and, she said, "pharmacy costs continue to go up at an alarming rate." PacifiCare ended its relationship with some physician groups and will look in the next few months at "targeted medical management," to see where and what kind of services are experiencing the highest uses, she said.

United Healthcare of Colorado also recorded hefty losses. The company lost $2.4 million in the third quarter, and $4.6 million through the end of September. "Overall, we've been facing an environment this year of increasing medical costs and a race on the part of HMOs to try and make sure their premium increases have been adequate to cover those increasing costs," said Jim Hertel, publisher of the Colorado Managed Care newsletter.

"It's apparent that in some instances, HMOs have been quite successful, and in others, they are being challenged by their medical costs and being forced to take extraordinary steps," Hertel said.

Vic Lazzaro, United Healthcare of Colorado's president and chief executive, said a large part of the loss was due to a jump in the rates it pays hospitals, as well as an increase in the cost of outpatient surgery.

"The rates of increase were greater than we anticipated, and we were unable to build them into our premiums," Lazzaro said.

The company has enacted double-digit rate increases and has taken steps to contain costs, Lazzaro said. "We believe we have our premiums appropriately priced and remain optimistic about next year." Rocky Mountain HMO of Grand Junction reported a loss of $530,242 in the third quarter, but a year-to-date profit of $929,698, according to a statement it filed with the Colorado Division of Insurance.

Kaiser Permanente of Colorado looks to have turned in the best third-quarter performance among the biggest HMOs, racking up a $13.6 million profit in the quarter and $24.7 million through the end of September, up from $16.4 million a year earlier.

"We're very pleased," said Chris Binkley, president of Kaiser Colorado. "We have real stability with our medical group and our delivery system, and our focus during the year has been quite extraordinary."

The company works mainly with the 550 doctors in Colorado Permanente Medical Group. "They've done a great job of taking care of our senior population," Binkley said.

Although Cigna Healthcare of Colorado reported a net loss for the quarter, it was due to a reconciliation of administrative costs with its parent company and not a reflection of the business.

Through the end of the third quarter, Cigna earned $487,919, and is on track to post positive earnings numbers for the year, said Daryl Edmonds, general manager for Cigna HealthCare of Colorado.

"We believe we are pricing our product appropriately," said Edmonds. "We're not about to buy membership. We charge an appropriate rate to deliver quality health care, cover our administrative costs and show a profit."

The HMOs have passed along some double-digit premium increases to Colorado employers to help cover their escalating costs.

Bill Lindsay of Benfit Manage ment Design, which works with companies to develop health plans, said smaller companies have seen rate increases of 40 percent, and some larger groups as much as 60 percent.

"They are high all across the board. It's the worst I've ever seen it," Lindsay said.

Another benefits specialist, George Ketchel of Marsh USA Inc., said the rate increases have been across the board, with the biggest ones coming from HMOs in the worst financial shape.

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